Oil shipments by rail in Maine

Since 2011, oil shipments across Maine to New Brunswick have skyrocketed. The Montreal, Maine & Atlantic Railway and Pan Am Railways carry crude oil that originated in North Dakota to a refinery owned by J.D. Irving in St. John, New Brunswick. An Irving subsidiary, Eastern Maine Railway, connects to the MM&A and Pan Am lines in Mattawamkeag.
Pan Am has not yet reported its oil total for April.

Maine’s financial capacity to respond to an oil spill has been cut by 60 percent since 2005 because of a sharp decrease in tariffs collected from companies that ship crude oil and legislators’ decisions to raid a designated cleanup fund.

Meanwhile, with crude oil shipments across Maine increasing dramatically, oversight of the state’s 1,154 miles of railroads is largely left to one federal inspector and the companies that own the lines.

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The Maine Department of Transportation found in 2006 that most of the track on those lines barely had the capacity to support a modern tank car filled with oil.

Those facts stand out amid questions about safeguards against an accident similar to the one last weekend in Lac-Megantic, Quebec, where a runaway train caused an explosion and fire that left 24 people dead and another 26 presumed dead.

The disaster is particularly relevant for Maine because the Montreal, Maine & Atlantic Railway train was scheduled to cross the state with 50,000 barrels of light crude oil on its way to New Brunswick.

Nearly 5.3 million barrels passed through the state last year, and the number is on the rise as market forces make Maine a waypoint for oil extracted from the Bakken oil fields in North Dakota.

The light crude from Bakken is also more explosive than heavy crude, said Mark Kaiser, a professor and director of research at the Center for Energy Studies at Louisiana State University.

“It’s a hazardous material, and volatile,” Kaiser said. “The lighter it is, the more volatile, with the extreme being gasoline.”

The increased rail traffic and the disaster in Lac-Megantic have already prompted a review of Maine’s rail safety conditions and disaster preparedness. Gov. Paul LePage signed an executive order this week calling for a safety review.

However, the state has little authority over its railroads, most of which are privately owned. Oversight falls to the Federal Railroad Administration and the rail companies themselves, which employ their own inspectors. The federal agency is responsible for making sure the companies comply with safety regulations.

In Maine, track inspection is assigned to one state employee deputized by the Federal Railroad Administration. Maine Department of Transportation spokesman Ted Talbot said the federal agency determines the inspector’s schedule.

“States have no regulatory role over the railroads,” said Talbot. “The idea behind the governor’s order is to take a look at those federal safety reports.”

Last month, the Government Accountability Office, the watchdog agency for the federal government, reported that the Federal Railroad Administration has 470 inspectors in its headquarters and regional offices, in addition to 170 state inspectors. The U.S. rail system consists of 760 railroads with 230,000 employees and 200,000 miles of operating track.

Because the railroad administration is so small relative to the industry, the railroads themselves are the primary guarantors of safety, the report said.

The condition and inspections of Maine’s railroads have been a topic of discussion in the past. In 2006, the state Department of Transportation published a report that said budget constraints, decreased federal dollars and limited investment by railroad companies threatened to deteriorate the infrastructure.

The report also said that status quo maintenance wasn’t keeping pace with the industry.

According to the report, 92 percent of the active track in Maine would not support a 286,000-pound rail car, which “is quickly becoming the rail industry standard.”

A modern oil tanker car carries 650 barrels – 27,300 gallons – of oil and has a maximum weight of 285,000 pounds, said Steven Kelly, senior vice president of Purvin & Gertz, a consulting company for the oil and gas industry.

Pan Am Railways and the Montreal, Maine & Atlantic Railway are two of the leading carriers of Bakken crude. The companies did not respond to requests for comment Thursday.

Last year, Pan Am Railways told the Portland Press Herald that it had “spent several million dollars upgrading its tracks in Maine.”

According to the state’s 2006 report, installation of 132-pound rail would cost $208,000 per mile. Last year, the American Society of Civil Engineers gave Maine’s railroads a grade of C.

Crude oil shipments in Maine jumped from 25,000 barrels in 2011 to 5.2 million in 2012. Oil shipments for the first three months of this year averaged about 800,000 barrels a month.

Chalmers “Chop” Hardenbergh, editor of Atlantic Northeast Rails & Ports, a trade journal, said that with oil shipments on the Maine Montreal & Atlantic Railway shut down because of Saturday’s crash, Pan Am Railways will likely see its oil shipments increase.

Pan Am Railways runs trains through the most populated parts of Maine, including Saco, Biddeford, Portland, Auburn and Lewiston. It now runs about seven to 10 oil trains per month, Hardenbergh said.

The Maine Department of Environmental Protection is investigating the company’s failure to pay two months’ worth of tariffs into the Maine Coastal and Inland Surface Oil Clean-up Fund. The fund, established in state law, assesses a 3-cent tariff on each barrel of crude oil shipped through the state to help pay for any cleanups.

Reuters reported Thursday that Pan Am has not paid since April.

Jessamine Logan, spokeswoman for the DEP, said Thursday that a delay isn’t uncommon, but a two-month delay is. “We are investigating and following up with them,” she said.

The amount of money in the cleanup fund has also come under scrutiny, falling from $6.7 million in 2003 to $3.7 million in 2012, according to DEP data. Expenditures for cleanup have exceeded revenue four times since 2007, including last year.

The decrease has been caused by a sharp reduction in tariffs collected from oil transports on the Portland-to-Montreal pipeline.

Logan noted that the Legislature has taken nearly $1 million from the fund over the last 10 years to balance the state budget. Additionally, she said, lawmakers have drawn more than $2 million from a separate groundwater remediation fund.

This year, the DEP supported L.D. 1340, a bill sponsored by Rep. Ryan Tipping-Spitz, D-Orono, that closed a loophole allowing railroads to avoid the tariffs. But the department opposed a section of the bill that would have increased the tariff by 1.5 cents per barrel of crude oil if the fund fell below $2 million.

Lawmakers approved, and Gov. Paul LePage signed, a bill that closed the loophole but excluded the tariff increase.

The groundwater cleanup fund has a similar trigger, allowing the DEP commissioner to reassess tariffs if the fund falls below $10 million, and increase them if it hits $5 million.

The DEP said the increase in the surface water fund wasn’t necessary because “if a catastrophic event occurs, the state can leverage other funding sources to finance cleanup and recover those costs from the responsible parties.”

Joe Payne, a member of the state’s Oil Spill Advisory Committee and the Friends of Casco Bay, an environmental group, disagreed. He said Thursday that the fund barely paid for the numerous small oil spills that occurred in 2012. A disaster, he said, could knock the state on its heels.

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